RBS stake costs taxpayers dear
Taxpayers face an immediate £4bn paper loss this week as the Treasury takes a controlling stake in ailing Royal Bank of Scotland.
Losses: RBS shares will go unsubscribed
Existing RBS shareholders have until Tuesday to take up their rights to buy new shares, but with the market price languishing far below the rights issue level, even loyal RBS insiders admit the Treasury will end up with a controlling stake.
The final humiliation of RBS comes as Citigroup, once the world's biggest bank, faces its own meltdown.
Its market value has halved in under a week and bosses are locked in talks over how to restore confidence. A breakup of Citigroup is the favoured option, but a takeover by a rival or a major investment by the US government has also been mooted.
RBS shares ended last week at 47.4p, 27% below the 65½p-a-share price for the rights issue.
They hit fresh lows as chairman Sir Tom McKillop and outgoing chief executive Sir Fred Goodwin made a humiliating apology over the bank's crisis.
The Government will buy all unsold shares at 65½p a share. This will give RBS the £15bn it needs. In return, the Treasury will get a 58% stake.
Lloyds TSB and HBOS are also raising cash in rights issues. At current prices those issues are also likely to be snubbed by existing shareholders and the Treasury, as underwriter, is likely to emerge as a 43 per cent shareholder in the merged bank.
Hopes among some HBOS shareholders that it could survive independently of Lloyds TSB were dashed last week when Chancellor Alistair Darling said that without a deal the terms of the government's bail-out would have to be renegotiated.
Former Bank of Scotland chief Sir Peter Burt and ex-RBS chairman Sir George Mathewson quickly declared they were abandoning their campaign against the Lloyds takeover.
HBOS shareholders will vote on that takeover on December 12. A poll of HBOS shareholders on Financial Mail's sister website thisismoney.co.uk found that 61% said they would vote against the merger.
But with City institutions set to back the deal, the takeover is seen as inevitable and last week the HBOS share price moved to within a whisker of the Lloyds TSB takeover price.
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